UK's Drax profit falls as power prices drop but buybacks extended

By Nina Chestney

LONDON (Reuters) -Drax Group reported an 11% drop in first-half adjusted core profit on Thursday due to lower UK wholesale power prices, as ongoing energy market fluctuations continued to impact the British power company.

Drax, which has converted coal plants to run on biomass, provides about 5% of Britain’s electricity.

Adjusted profit, or EBITDA, fell to 460 million pounds ($611 million) in the first half, from 515 million pounds in the same period last year.

The group said it does not expect changes to its adjusted EBITDA of 899-910 million pounds for the full year.

Wholesale power prices in Britain have fallen over the past couple of years, after rising dramatically following Russia's invasion of Ukraine.

Drax also announced an extension to its current 300 million pound share buyback programme by an additional 450 million pounds over three years.

Shares jumped 6.2% to 720 pence in early trading.

Earlier this year, the government extended subsidies - called contracts-for-difference (CfD) - for biomass units that were due to expire in 2027 to 2031.

The group said it expects to sign a final agreement with the UK government later this year for a subsidy its four biomass units.

Under this subsidy scheme, Drax's power plant in North Yorkshire would be able to boost generation when there isn’t enough electricity, helping to avoid the need to use more gas or import power from Europe. When there is too much electricity on the UK grid, Drax would be able to reduce generation, helping to balance the system.

($1 = 0.7535 pounds)

(Reporting by Nina Chestney and Ankita Bora in Bengaluru;Editing by David Goodman and Bernadette Baum)